Australian Federal Budget 2026-27: corporate tax measures

On 12 May 2026, Treasurer Jim Chalmers handed down what he described as “the most important and ambitious Budget in decades”. The backdrop was demanding: a global oil shock driven by conflict in the Middle East, headline inflation forecast to reach 5% by mid-2026, and sustained cost-of-living pressure on households and businesses. 

The key tax reforms centre on the capital gains tax (CGT) discount and negative gearing – including a 30% minimum tax on capital gains and discretionary trusts – together with more than $700 million in new ATO funding and announced additional compliance activity on R&D, fraud and cross-agency regulatory matters. Summarised below are the key business tax measures announced in the 2026-27 Australian Federal Budget, together with a broader stocktake of the current corporate tax landscape.

Key business tax measures announced in the 2026-27 Australian Federal Budget 

CGT discount 

Arguably the most significant announcement in the budget was the replacement of the 50% CGT discount with an indexing mechanism, which effectively represents a return to the approach pre-1999. 

Additionally, a minimum 30% tax will be imposed on capital gains accruing after 1 July 2027, which will be imposed after the application of indexation. 

These changes will apply to CGT assets held by individuals, trusts and partnerships. Superannuation funds qualify for a one third discount (rather than the 50% discount) and will therefore not be subject to the change. 

Although it was initially speculated that the removal of the CGT discount would only apply to investment properties, the announced measure will affect all asset classes other than new residential property. CGT will also apply to pre-CGT (pre-1985) assets in relation to gains accrued after 1 July 2027.

Indexation

Under the indexation model, a CGT asset’s cost base for the purpose of determining net capital gains will be determined with reference to an indexation formula, which is designed to broadly reflect the impact of inflation. The government has stated that indexation will be calculated using CPI in a similar manner to arrangements previously in place between 1985 and 1999. Because the CPI is a cumulative index which reflects compounded price movements, this formula takes into account the effect of compounding. It is likely that ATO guidance, tools and online calculators will be made available for this calculation.

In effect, this should result in an annual increase in cost base, reducing overall capital gains (compared to if no adjustment were available). However, the impact in comparison to a 50% discount will depend on factors such as the total funds invested in the asset, the return, the rate of inflation, and the holding period. 

While net-of-tax modelling will vary on a case-by-case basis, broadly this reversion to indexation will result in worse outcomes for short-to-mid-term holds, or assets with a high rate of return (e.g. holds of one year, which would previously have benefited from a 50% discount, would only benefit from one year’s worth of indexation). 

Application to start-ups, venture capital and management equity plans

Indexation may also impact the start-up sector, as cost-base (and thus the indexation base) is naturally low (if not nominal) for companies in their infancy. Previously, the start-up sector, and tax concessional options granted by start-up companies under Division 83A of the Income Tax Assessment Act 1997 (Cth), benefited from a 50% discount applied to the margin between capital proceeds and cost-base. Now, indexation would provide minimal benefit (as the indexation multiple would be applied against a small base). The government has stated that it will consult with stakeholders on the treatment of early stage and start-up businesses, given the unique features of the tech and start-up sectors. 

Businesses will need to take the CGT reforms into account when designing executive remuneration plans. For example, arrangements which involve the acquisition of shares or options by individuals for full market value, and which otherwise were treated as an acquisition of a CGT asset eligible for a 50% CGT discount on disposal, will be impacted. In the absence of any exemptions or carve-outs for such shares and options, such arrangements will no longer result in a discounted capital gain. 

New builds

Owners of new residential properties will be eligible to choose either the 50% discount, or indexation and the minimum tax, when they sell that property. Therefore, such property is effectively exempt from the measure. As discussed further in relation to negative gearing below, it appears that new residential property may be defined differently in comparison to similar concepts in other tax regimes (such as GST).  

Minimum tax on capital gains

A minimum tax rate of 30% will apply to capital gains accruing from 1 July 2027. This measure is intended to reduce the benefit of taxpayers deferring gains to years where their marginal tax rates are low (e.g. sale of capital assets during retirement). The minimum tax will not apply to certain means-tested income support recipients. 

When does the change to the CGT discount apply from? 

The transitional arrangements for this measure are of substantial interest, and some important new details emerged on budget night. 

The measure applies on a partially ‘grandfathered’ basis and, as a general principle, the switch to indexation will not apply until 1 July 2027. 

Where a taxpayer held assets prior to 1 July 2027, they will be entitled to apply the 50% discount for gains accrued on the CGT asset through to 1 July 2027, with indexation to apply thereafter. Although it had been reported that this arrangement would involve a simple, time-based pro rata apportionment, it appears that the arrangement may instead involve a valuation as at 1 July 2027. The asset’s value (and any portion of gain accrued to 1 July 2027) will be determined by taxpayers as part of their tax return in the year of sale or realisation. Taxpayers may choose to obtain their own valuation as at 1 July 2027 (including using quoted prices for listed securities), or by using a ‘specified apportionment formula’, which will estimate the value on 1 July 2027, based on growth over the asset’s holding period. 

Pre-CGT assets will continue to be exempt in relation to gains accrued before 1 July 2027, with indexation and the 30% minimum tax applicable to gains accrued after that date. Presumably, the method for apportioning the gain will be the same as described above. The application of capital gains tax to pre-CGT assets is a surprising aspect of the measure. Many taxpayers that hold such assets are likely to have assumed that they would never be subject to tax on sale. 

Foreign resident capital gains tax regime

On 10 April 2026, the government released exposure draft legislation for its proposed changes to the foreign resident CGT regime. First announced in the 2024-25 Australian Federal Budget, under the proposed changes:

• certain exit transactions spanning as far back as 12 December 2006 concerning infrastructure assets fixed on land and/or interests or rights over Australian land and leases of fixed assets that were not previously ‘real property’ at general law, and which therefore were not previously considered to be subject to Australian tax, could be recaptured; 
   
• contractual rights linked to land or fixed/installed infrastructure, including rights exercisable over or in relation to Australian land, or over things fixed or installed on Australian land, which would not previously have been understood as ‘real property’ or immovable property for treaty purposes would be taxable; 
   
• a limited 50% discount transitional rule would be retained for renewable energy generation asset exits by certain foreign investors until 30 June 2030; 
   
• indirect sale testing will become more onerous, with a 365-day principal asset test being introduced to ascertain whether or not an asset is an indirect real property interest; and 
   
• where the value of indirect real property interests exceeds $50 million, vendors would be required to notify the ATO of the transaction. Purchasers would also need to test vendor declarations against an objective knowledge standard (previously, purchasers could rely on such declarations unless they knew them to be false).

For many, the budget announcement in this regard will be a disappointment. After a truncated two week consultation, there is no extension of the transitional 50% CGT discount beyond 30 June 2030 and no narrowing of retrospectivity; the 12 December 2006 start date remains. Submissions sought either the elimination of retrospectivity or a significantly shortened look‑back, and an expanded, longer‑dated concession - none of which has been taken up. Meaningful engagement on the scope of the expanded rules should now follow.

More detailed analysis on the announced changes is available in our earlier insight, Significant and retrospective CGT changes for taxable Australian property: draft legislation released. 

Negative gearing 

As widely expected, the government has limited the ability for taxpayers to negatively gear income generated from investment properties. The measure is principally directed at the residential housing market. Commercial property and other asset classes, such as shares, will remain subject to existing arrangements. Further, the changes will apply across individuals, partnerships, companies and most trusts. However, widely held trusts (including most managed investment trusts) and superannuation funds (including SMSFs) are proposed to be excluded from the regime. It is flagged that there will be exemptions for build-to-rent developments and private investors supporting government housing programs.

Deductions attributable to established residential investment properties acquired after 7:30pm (AEST) on 12 May 2026 will no longer be immediately deductible against other forms of assessable income. Instead, net rental losses will generally be quarantined and carried forward to offset future residential property income and capital gains derived from residential property investments.

The announced changes preserve full negative gearing concessions for newly constructed residential properties. This may alter the relative attractiveness of new build and build-to-rent projects compared to acquisitions of existing residential properties, particularly when considered alongside the announced CGT discount reforms.

The precise legislative definitions of ‘residential property’, ‘established residential property’ and ‘new build’ remain to be seen. However, the Budget Fact Sheet indicates that the new build exemption will be confined to properties that genuinely add to housing supply. 

The Fact Sheet gives the following examples: 

What is eligible:

• a newly constructed apartment bought off-the-plan; 
   
• a duplex constructed through a knock-down rebuild replacing a single, free-standing house; 
   
• any residential construction on previously vacant land; and
   
• a newly built property which is occupied for less than 12 months before being first sold.

What is not eligible:

• an established property that has recently been extended to add additional bedrooms; 
   
• a free standing house constructed through a knock-down rebuild replacing an older, smaller free standing house; 
   
• a granny flat built adjacent to an established property that is not eligible for negative gearing; and
   
• a newly built property which is occupied for more than 12 months before being sold to a subsequent investor.

It also remains to be seen how the changes to negative gearing will apply to tiered-trust structures. 

From when do the changes to negative gearing apply? 

The changes will apply from the commencement of the 2027–28 income year (being 1 July 2027) to established residential properties acquired from 7:30pm (AEST) on 12 May 2026.

Residential properties acquired prior to that time will continue to benefit from existing negative gearing arrangements until disposal. This includes arrangements where a binding contract was entered into prior to 7:30pm (AEST) on 12 May 2026, notwithstanding settlement occurs subsequently.

Extended ban on foreign purchases of established dwellings 

The government has also extended the temporary ban on foreign purchases of established residential dwellings, through to 30 June 2029. The ban was originally due to expire on 1 April 2027. 

Minimum tax for ‘discretionary’ trusts 

From 1 July 2028, a 30% minimum tax will apply to the taxable income of ‘discretionary trusts’, collected at the trustee level. Beneficiaries must still include their share of trust net income in their own returns, with beneficiaries other than corporates receiving non‑refundable credits for the tax paid by the trustee that can be used to offset current‑year liabilities. The measure is framed as improving fairness by reducing the extent to which discretionary trusts can deliver outcomes that are not available for individuals via ‘income splitting’. 

The 30% minimum tax will not apply to fixed and widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates, or charitable trusts. Certain categories of income will also be excluded, including primary production income, income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of discretionary testamentary trusts.

A threshold issue is defining those trusts to which this measure applies. For example, the government might specifically define the categories of discretionary trust to which the measure applies instead of referring to the existing concept of a ‘fixed trust’, which has long been an uncertain area.

The interaction between the minimum tax and the dividend imputation system will need to be closely monitored during consultation. The government has stated that trustees receiving franked dividends will be required to use their franking credits to pay the minimum tax, which may impact the ability to ‘stream’ franking credits. Further, corporate beneficiaries will not receive non-refundable credits for minimum tax paid by the trustee. The stated reason for this approach is “to avoid them converting these to refundable franking credits to avoid the minimum tax”. 

Accordingly, it remains somewhat unclear whether corporate beneficiaries will receive recognition for the minimum tax, or whether they will be required to pay an additional level of corporate tax on the distribution, thus increasing the effective tax rate on that income. This outcome may discourage the use of so-called ‘bucket companies’ as beneficiaries of a family trust. 

Expanded rollover relief will be available for three years from 1 July 2027 for small businesses that wish to restructure out of discretionary trusts to other entity types, such as a company or fixed trust. 

Consultation will occur on the mechanism for collecting the minimum tax, how the trustee uses franking credits that exceed the minimum tax liability, and on the rollover relief provided to support restructuring.

From when do the changes to trust distributions apply? 

The new minimum tax rate will apply to all trust distributions made from 1 July 2028. 

ATO funding and compliance action

The last budget provided an additional $999 million in funding for the ATO to extend and expand compliance activities, with a focus on measures directed towards multinational and large taxpayer compliance. In the last year, the ATO has taken a firmer stance across a variety of complex international and domestic anti-avoidance measures (albeit with limited success), including by litigating relevant matters (discussed below). 

This budget provides the ATO with an additional $700 million in funding, which has been split across a variety of specific tax measures. The ATO will also undertake additional compliance activities on the R&D tax incentive and fraud, and will be able to share information more readily with other government regulators (through targeted exceptions to the tax secrecy provisions). 

In some cases, the ATO has recently recommended imposing lengthy and ongoing reporting conditions for commercial foreign investments in Australia via the FIRB process. ‘Ineffective conditions’ on existing foreign investments will now be removed. This sits alongside the intended reforms to accelerate and streamline approvals for foreign investment across relevant state and federal regulatory matters. 

Pillar Two amendments 

The government will amend Australia’s global and domestic minimum tax legislation (Pillar Two) to implement the OECD/G20 side-by-side package. This was agreed on 5 January 2026, with application from 1 January 2026. The budget states that the measure is intended to ensure Australia’s global minimum tax rules are consistent with those of other implementing jurisdictions and to support the OECD/G20 international corporate tax reform process. The measure is estimated to decrease receipts by $240 million and increase payments by $11 million over the five years from 2025–26.

Focusing on US-headed groups, the side-by-side settings will allow eligible groups to make an election under which the income inclusion rule (broadly, the rule that can impose top-up tax at the parent entity level) and the undertaxed profits rule (the backstop rule that can allocate residual top-up tax to other implementing jurisdictions) will not apply where the relevant conditions are met. Qualified domestic minimum top-up taxes in source countries will continue to apply and take priority where relevant.

The package also introduces additional simplifications, including a permanent simplified effective tax rate safe harbour, a substance-based tax incentive safe harbour, and a one-year extension of the transitional country-by-country reporting safe harbour.

Given the scale of Pillar Two, a broader review of how these rules interact with Australia’s wider tax system, including the treatment of trusts and the tax consolidation regime, is timely.

Changes to the taxation of venture capital limited partnerships 

The thresholds that apply to tax incentives to venture capital limited partnerships (VCLPs) and early-stage venture capital limited partnerships (ESVCLPs) will increase as follows: 

• VCLP investee asset size cap: increasing from $250 million to $480 million; 
   
• ESVCLP investee asset size cap (at the time of investment); increasing from $50 million to $80 million; 
   
• ESVCLP tax incentive cap (for fully tax-exempt returns): increasing from $250 million to $420 million; and 
   
• Maximum ESVCLP fund size: increasing from $200 million to $270 million. 

VCLP provides flow‑through treatment with eligible foreign limited partners generally disregarding gains on disposals of eligible venture investments held for at least 12 months (and carried interest taxed on capital account). An ESVCLP is a flow‑through early‑stage vehicle under which returns to limited partners are broadly tax‑exempt and investors may access a non‑refundable 10% offset on contributions. The Eligible Venture Capital Investor programme is the direct‑investment registration pathway for foreign investors to access equivalent concessions.

The increases will apply to new and existing funds and to new investments they make, including where funds make further investments in businesses already held. Eligible VCLPs must remain in compliance with their existing investment plans or seek approval for a replacement plan. 

The government has also announced that the eligible venture capital investor program, (which was the direct‑investment registration pathway for foreign investors to access equivalent concessions), will be closed to new applications from 7.30pm on 12 May 2026. 

From when will the new thresholds apply? 

The relevant thresholds will increase from 1 July 2027. 

‘Carry back’ of losses 

The government has announced a new, permanent carry back tax loss mechanism for companies with an aggregated annual global turnover of less than $1 billion. 

If a relevant company incurs a tax loss in a given income year, it will now be able to use that loss to offset tax paid in the prior two income years (as compared to current rules, which generally only permit tax losses to be carried forward and offset against future liabilities). The measure will only apply to revenue losses and will be limited by the company’s franking account balance.

From when do the carry back loss provisions apply? 

The measure will apply for tax years commencing on or after 1 July 2026. 

Loss refundability for start-up companies 

The budget has also provided for a refundable tax offset for start-up companies with aggregated annual turnover of less than $10 million. 

The offset will apply to tax losses generated in the first two years of operation. The amount of the offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year. The stated reason is to “support young firms to employ Australian workers and support job creation.” How this works for a group structure will remain to be seen. It also does not provide any incentive for start-ups operating outside of a company structure. 

From when do the loss refundability measures apply? 

The measure will apply for tax years commencing on or after 1 July 2028. 

PAYG instalment reform

The government has announced changes to the PAYG instalment regime, including expanded access to monthly PAYG instalments and the introduction of dynamic PAYG instalment calculations embedded within ATO-approved accounting software. Eligible small and medium businesses will be able to opt into monthly PAYG instalments calculated using ATO-approved software, with instalments intended to better reflect real-time business activity.

Importantly, taxpayers with demonstrated histories of non-compliance will also be required to report and pay PAYG instalments monthly. 

From when does the new PAYG instalment regime apply?

The changes will apply from 1 July 2027.

Research & Development tax incentives 

The budget also saw an increase to the tax incentive expenditure threshold from $150 million to $200 million. This means that higher tax offsets as a result of ‘R&D premiums’ (above the corporate tax rate) can be applied to eligible expenditure up to an increased cap of $200 million. Any amounts above the cap will continue to be subject to the lower R&D tax offset amount, equal to the entity’s corporate tax rate (as is currently the case above the $150 million cap). This measure aims to boost R&D activities of large business. 

Additionally, the budget included several changes to the R&D tax incentive regime which are seemingly intended to incentivise R&D activities across a broader range of business (including smaller businesses). These measures include: 

• increasing the offset for core R&D expenditure, by increasing the core R&D offset rates by 4.5% (resulting in an increase in the offset by around 25 to 50%); 
   
• reducing the R&D intensity threshold from 2% to 1.5%; 
   
• increasing the turnover threshold for the highest offset rate from $20 million to $50 million (which should enable entities to retain access to the refundable tax offset for longer into their life-cycles); and 
   
• providing that older firms (i.e. 10 years old) which are below the $50 million turnover threshold will remain eligible for the higher offset rate (albeit refundability will be limited for firms under 10 years of age). 

However, supporting R&D expenditure will no longer be eligible for the tax incentive, and the minimum expenditure threshold for claims will be lifted from $20,000 to $50,000. (Activities valued below this amount will be required to be undertaken with a registered Research Service Provider or Cooperative Research Centre to be eligible).

From when do the R&D changes apply? 

The changes to the R&D regime will apply from 1 July 2028. 

Permanent extension of the instant asset write off 

The government has announced that it will permanently extend the $20,000 instant asset write-off for small business with turnover up to $10 million. Additionally, assets valued at $20,000 or more will continue to be able to be placed into the small business simplified depreciation pool. 

Permanent FBT discount for electric cars

The government has announced a permanent 25% discount on fringe benefits tax (FBT) for electric cars valued up to (and including) the fuel-efficient luxury car tax threshold. The discount will be implemented through the imposition of a 15% rate in the FBT statutory formula. This replaces the current full FBT exemption for electric cars, which was previously announced as being up for review in 2025. 

The existing 20% statutory rate will continue to apply for all other cars, including electric cars costing more than the fuel-efficient luxury car tax threshold. 

The government has also confirmed that eligible electric vehicles will continue to be exempt from import tariffs on an ongoing basis. 

From when does the FBT discount apply?

The 25% FBT discount will come into effect from 1 April 2029. 

All eligible electric cars will retain the FBT discount rate that was in place under current arrangements.  The current FBT exemption will continue to be available for electric cars valued up to and including $75,000 that are provided before 1 April 2029. Electric cars valued between $75,000 and the fuel-efficient luxury car tax threshold that are provided between 1 April 2027 and 1 April 2029 will also be eligible for a 25% FBT discount. 

The broader ‘state of play’: A recap of recent changes and developments in the Australian corporate tax landscape 

Announced but unenacted measures

Summarised below are measures that have been previously announced by the government, but not yet implemented (or covered in this budget): 

• New royalty penalty (the PepsiCo response): In response to the PepsiCo line of decisions (covered in our insight, PepsiCo case comes to an end: High Court calls last drinks and closes the bar), the government had previously announced that it would introduce a new penalty for taxpayers with more than $1 billion in annual global turnover that have mischaracterised or undervalued royalty payments (to which withholding tax would normally apply). The ATO had previously indicated that the penalty would commence from 1 July 2026.
   
• ‘Strengthening Australia’s tax penalty regime’: Announced in the 2024-25 ‘Mid-Year Economic and Fiscal Outlook’ update, this measure sought to introduce administrative measures designed to ensure penalties applied where taxpayers were in a loss position, and to penalise large taxpayers that mischaracterised undervalued interest or dividend payments to which withholding tax would have otherwise applied. Again, the initially proposed start date was 1 July 2026, but no exposure draft legislation has been released.
   
• ‘Tax integrity’ – broadening the general anti-avoidance rule: It was previously announced that the general anti-avoidance rule (Part IVA) would be expanded. The initial intention was for the rule to apply to schemes that reduce tax paid in Australia by accessing lower withholding rates on income paid to foreign residents, and schemes that achieve an Australian income tax benefit even where the dominant purpose was to reduce foreign income tax.
   
• Clarifying Managed Investment Trust (MIT) arrangements: The government had announced that it would take steps to ensure legitimate investors could continue to access concessional withholding rates (in particular, clarifying the application of trust pooling requirements, and to make it clear that trusts ultimately owned by a single widely-held investor are able to access MIT concessions). These measures, which would complement ATO Tax Alert TA 2025/1, and were intended to apply to fund payments made from 13 May 2025, have not yet been subject to draft legislation.
  
  Additionally, the government announced in the 2023-24 Australian Federal Budget that it would extend the clean building MIT withholding tax concession to data centres and warehouses that meet certain energy efficiency standards. Adoption of this measure continued to be deferred.
   
• Crypto asset reporting framework: Announced in the 2025-26 Mid-Year Economic and Fiscal Outlook, the government announced that it would implement a ‘crypto-asset reporting framework’ and a domestic crypto tax transparency reporting regime, together with associated amendments to the common reporting standard and adoption of the OECD ‘crypto asset reporting framework’ for the automatic exchange of tax relevant information on crypto assets. These measures were initially announced to commence in 2027, with the first exchange of information with foreign tax authorities expected to take place in 2028. No draft legislation has been released to date.
  
  However, we expect crypto to continue to be an area of focus for the ATO. As recently as 7 May, the Commissioner has sought leave to intervene in the High Court (in the matter of Poulton v Conrad), on the basis that the Commissioner has an interest in the question of whether a holding of Bitcoin is property under the general law, which in turn will have bearing on whether Bitcoin holdings are property for the purpose of the CGT regime.

Recent and upcoming cases 

Summarised below are recent key federal tax cases (and pending decisions): 

• Ierna / Hicks: On 9 April 2026 the High Court denied the Commissioner of Taxation’s special leave application to appeal the Full Federal Court’s decision in Commissioner of Taxation v Hicks (itself unanimously dismissing the Commissioner’s appeal and upholding the first-instance decision of Ierna v Commissioner of Taxation). In this case, the Commissioner unsuccessfully sought to argue that section 45B of the Income Tax Assessment Act 1936 (Cth), or failing that, Part IVA of that act, applied to a return of capital. The decision arguably provides expanded scope for companies to make capital returns, including where a company has minimal distributable profits or is unable to pay a dividend. This also means that the supposed tension identified by the Commissioner between the Part IVA decision in Hicks (where the Full Federal Court suggested that identifying one reasonable alternative postulate which does not result in a tax benefit may be sufficient to discharge a Part IVA onus), and that of the High Court in PepsiCo (which raises the possibility that there can be more than one reasonable alternative postulate) remains unresolved. 
   
• Merchant: In Merchant, the Full Federal Court, by a 2-1 majority, held that a sale of ASX-listed shares to a related entity, which triggered a capital loss later used to offset a capital gain from a separate sale of interests to an unrelated entity, was subject to Part IVA. This case highlights the potential for the Commissioner to take a heavy approach in respect of what he considers to be ‘high risk’ arrangements (having made determinations under both the general Part IVA anti-avoidance provisions and the dividend stripping rules in section 177E, to which penalty and interest charges were added and have been maintained for almost a decade). The taxpayer was granted special leave to appeal on 9 October, having been heard on 17 and 18 March 2026.
   
• Bendel: In Bendel, the Full Federal Court unanimously held that unpaid present entitlements owed to a corporate beneficiary of a discretionary trust are not loans for the purposes of Division 7A (in effect overturning the ATO’s longstanding position that unpaid present entitlements could constitute loans triggering the deemed dividend provisions). The Commissioner was granted special leave on 12 June 2025. With the hearing taking place on 14 October 2025, the decision of the High Court remains pending.

Board of Taxation consultation on thin capitalisation and the debt deduction creation rules

As part of amendments to the thin capitalisation regime (announced as part of the 2022-23 Australian Federal Budget), Treasury was required to cause an independent review to be conducted as to the operation of the amendments. Consistent with this, the Board of Taxation is currently assessing whether thin cap amendments are operating in a manner consistent with policy intent. 

The review commenced on 1 February 2026, with the final report being required by 1 February 2027. This is a critical review to try to get Australia’s thin capitalisation and debt deduction creation rules on track.

The Federal Budget ‘wrap up’

The lead up to this budget attracted more discourse than usual, largely due to the anticipated resetting of tax levers affecting the investment property market. Consistent with expectations, the government introduced significant measures in the CGT and negative gearing space. However, measures introduced in the budget extended far beyond the real estate sector, and in certain circumstances, more clarity will be required as to how the announced reforms will work in practice. In any event, and as always, corporate taxpayers in Australia are recommended to remain vigilant in an increasingly complex regulatory environment.